Changing the role of the Underwriter

Apr 11, 2016

 "It's all very well us having the data from the brokers, but the hard challenge is getting our underwriters out to sell the business." Broker Development Director

A young person trying to find out what the job of an insurance underwriter entails today would find it universally described in terms of hard technical and analytical skills.  It is about risk pricing and analysis, and the need for softer skills is barely mentioned. Indeed, one US insurer was quoted as saying "Insurance underwriters don't interface directly with the customer, that is the job of the brokers and agents...".  This is clearly out of step with an industry that talks about the need for customer-centricity, change and innovation. I believe that although insurance leaders know that change is needed in how their underwriters operate, they have not yet succeeded in making it happen.

The need for change

Our recent research shows that there is now a pressing need to transform the role of the underwriter. The main reasons for this are:   

  • The average number of insurers that brokers consider for business is declining very fast, driven by commoditisation and consolidation. Waiting to be picked is no longer an option, underwriters need relationships. 
  • Brokers tend to stick with underwriters they trust and vice-versa, so it's very hard for even the most respected underwriters to build new relationships quickly. So underwriters have to focus on protecting and growing existing relationships, a job that is getting tougher as the growth of facilities and broker consolidation reduces the choice further. 
  • Historically underwriters have been trained to be reactive:  they lack the skills to go out and compete and win new quality business in a competitive marketplace. 

You only have to look at the detailed data behind our Leading Underwriters rankings to see what skills the next generation of risk takers will need to have to be adding value and winning business. We have identified four key characteristics in Leading Underwriters namely: 

Expertise 

Reputation 

Deal Making 

Relationships.  

While all of these characteristics are present, the degree varies and the chart below shows that currently the balance is heavily weighted toward Expertise and Dealmaking rather than Relationships.   

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If you then compare this with the data on what brokers need from underwriters, we find a very strong focus on understanding client needs and building relationships. So, while the best underwriters do build relationships, the bulk of insurers have much to gain from developing teams of underwriters who have the dynamic ‘softer’ skill-sets around commercial relationships. 

Making change happen

So, if change has to happen what does it entail? The first step is that the management of insurers needs to see the value of trying to get underwriters to change, and this is definitely underway. An increasing amount of the development work we do is with underwriting teams. While each business may have a different focus, we see six common areas for exploration: 

  1. Start from the top. Change needs leadership backing and a clear articulation of the strategic objectives. If the business challenge is not laid out, then it is hard to get the underwriters to understand the need for change.
  2. Agree the ‘burning platform’. Establish a specific urgent case for action and agree the consequences for not acting.
  3. Show them the evidence. While the financials are usually well known, the external and internal perceptions of the business and teams are typically not, meaning that all too often the internal assumption is that technical prowess outweighs the importance of building strong relationships with brokers.
  4. Commit to the future not the past. Obtain the personal commitments of each and every team member to determine the actions they will take to rewrite their future. This critical step involves getting teams to stop referencing the past and envisage what future success looks and feels like (particularly important in the London Market where so much of the present is imbued with the historical past). 
  5. Understand the brand. Education and articulation about the business promise - the ‘brand’ and what the business stands for, is required. Being part of the bigger story, and not just a lone individual is culturally positive and consistent in terms of client delivery… and probably the most difficult challenge of all.
  6. Measure results. A collective team push is highly effective in getting teams out of their comfort zone (and lifting heads up to see what others do) and this should always be reinforced by appropriate measurement, on the principle of what isn’t measured, doesn’t happen.

Taking the research and the changing competitive landscape into account, it is clear that transformation of the traditional underwriter role is overdue if businesses are to succeed in the modern global market.  The current evidence suggest that businesses who can develop formal relationship programmes will be the most successful. Insurers should try and learn from (but not copy) the ‘culture change’ experiences of other financial services businesses such as the global accounting firms which have developed relationship-focused, flexible, innovative and highly commercial cultures. 

Change needs to be implemented comprehensively and quickly across all middle and senior ranking underwriters so that new ways of working can be passed on to the upcoming underwriter cohort. Otherwise the next generation of underwriters will not be equipped with the required skills or mind-set to succeed in the modern insurance world.

This article was first published in Insurance Day.